Hugh C. Welsh, president & general counsel of DSM North America, moderates a discussion on why general counsels will be vying for the title president or CEO

By Daria Meoli

The role of the general counsel has evolved well beyond even the current title of art “chief legal officer”, to include becoming a strategic and operational business adviser to the CEO, CFO, and the board. This access to the corner office raises the key question of “what’s next” for many general counsels (GCs).

CFO Studio’s sibling, General Counsel Studio, recently invited general counsels from New Jersey and New York area companies to share opinions over dinner on whether the “next natural progression” for GCs is to ascend even higher in the corporat enterprise. The General Counsel Studio Executive Dinner was held at Blue Morel Restaurant, at the Westin Governor Morris Hotel in Morristown, NJ.

“We’re seeing the best general counsels becoming so diverse in their roles that they are already COOs in many respects,” said Andrew Zezas, host of General Counsel Studio, publisher of CFO Studio magazine, CEO of Real Estate Strategies Corporation, and the evening’s host. “More and more, we are seeing general counsels intentionally progress into the role of CEO or president.

The topic was a personal one for discussion leader Hugh C. Welsh, president and general counsel of DSM North America. “I think it’s natural for a lawyer to assume the role of president of the company,” said Welsh. “In this fantastic profession of ours we get the benefit of learning everybody else’s job. In the context of what we do everyday, whether it’s writing commercial agreements, handling regulatory matters, [or working on an M&A], we have to learn about all the other roles within a company. Over time, you get pretty good at other peoples’ jobs. Before you know it you’re a general manager.”

M&A work, for example, helps a general counsel to “become a strategic thinker for the company,” Welsh continued. “You spend a lot of time with the operating businesses and you get a sense of what their strategic direction is, what their long term goals are. You also end up spending a lot of time with the board. So, in addition to learning everybody else’s job up and down in the operations, you get a really good sense of where the company is going. That’s the role of the president.”

Many of the other participants echoed Welsh’s description of a GC as a general manager. Craig Bleifer, vice president, general counsel and secretary at Daiichi Sankyo, added that for a CEO to be successful, he should be able to think like a general counsel. “The CEO is making the call,” said Bleifer. “As general counsel, I deliver advice the CEO needs to make an informed decision on behalf of the corporation. As lawyers we are trained to think from a neutral place. If a CEO can make a call from that same neutral place, the better the job he or she will do for the company, owning the weight of any potential risk.”

One of the inherent traits of a GC is the ability to keep a level head during difficult conversations. “I think one of the values that general counsels add is the ability to fairly assess situations and not be afraid of conflict,” said Adam Ratner, vice president, associate general counsel and assistant corporate secretary at Jackson Hewitt Tax Service. “We handle conflict completely differently than our colleagues. Things that stress them out don’t worry me one bit. If there is a tough conversation that has to be had, we know there are ways to handle that. It’s a tactical skill that will continue to be useful when crossing over from a general counsel role to a presidential role.”

GCs Positioning Themselves for the Next Step

According to Welsh, general counsels have to create opportunities to demonstrate their ability to think strategically.

Rebecca A. Levy, general counsel at Summit Medical Group, volunteered to take on an initiative well outside her role, which resulted in plenty of face time with her company’s board of directors. “We’re a for-profit business, but as health care providers we have a passion for helping the community. We often get requests from people who want to donate time and money,” said Levy. “In the past, we did not have a vehicle for this. About a year ago, we decided to start a Foundation so we are better able to provide charitable services to the community.” Levy is secretary of that foundation and actively demonstrates her ability to be a big picture, strategic thinker to the top executives at her company, advising them on both for-profit and not-for-profit matters.

Experience in certain areas essential to running a business, such as talent management and motivation, may be difficult for a general counsel to demonstrate, but Welsh’s own career shows that this perceived deficit is not insurmountable.

Ready for Risk?

Are general counsels too risk averse by nature to be effective presidents or CEOs? Those gathered at the General Counsel Executive Dinner felt, generally speaking, that the GC’s view of risk could help him or her make more sound decisions in the chief role. “We train lawyers to be risk mitigators, so they can recognize risk and offer solutions that will mitigate that risk and enable the company to grow properly,” said Welsh.

Striking the balance between risk and growth may not always be perceived as strategic thinking by a CEO or board member. “When you have a CEO going full steam ahead on something and you have a solution that slows the train down, he might not want to hear that,” said Eric Winston, senior vice president & general counsel at INTTRA.

Michael A. Prokop, Esq. added, “In many companies, there is such enormous pressure on the guy behind the big desk to make quarterly numbers, it’s tough to hear a general counsel point out legal issues with his business strategy.”

When GCs decide to pursue a business role, it may be difficult to get others within the organization to view them as more than the safety belt. “Not letting legal get in the way of business can be a challenge,” said Mark, general counsel at Bluestar Silicones North America.

One guest asked Welsh how becoming president changed the way he views risk as a GC. “I believe that one of the reasons I was hired to do this job, in addition to having institutional knowledge of the organization, was that I was extremely entrepreneurial as a lawyer,” said Welsh. “I think our board had confidence that I would continue to be innovative in that sense, and mitigate the risk as we went along because of my experience as general counsel.” The roles and their required ways of thinking “work together, hand in glove. While I was a bit of a gunslinger even before becoming general counsel, my view of risk has since changed. When I was just a lawyer, it was always somebody else’s decision. I could come up with six different ways as to how we could get to a solution, but it was always somebody else’s decision. Now, as president, the buck stops with me. So, in some ways, I may be a little more risk averse now. “

How Results-Oriented Are GCs?

Equally important to demonstrating a willingness to accept risk, the guests agreed, is being able to yield results — and showing that to the board and other executives. “As the general counsel I look at decisions through the prism of the business person, because I wear many different hats in my company,” said Maria Chiclana, senior vice president, general counsel, and secretary at American Standards Brands. “The challenge is persuading a businessperson that legal can add value to the overall strategy. There’s value in M&A work, there’s value in IP work, value in licensing work, but you have to be able to quantify that based on results. You have to say to the business side, ‘Tell me how you can help us deliver the results.’ “

Welsh said he believes there will be “more and more GCs assuming the president’s role going forward.” He said, “I really believe it’s because of all of the operational experience that a general counsel gets working with the HR function, working with the regulatory groups, and working with manufacturing groups. Who else in the company has the capacity to touch every aspect of the internal value chain?”

For CFO’s looking to ascend to the top spot, don’t rule out your GC as tough competition.

Cheryl Marks Young, CFO of Easter Seals New Jersey, leads a discussion on how profit-generating strategies influence the way not-for-profits do business

By Daria Meoli

“Most people outside the not-for-profit sector think our jobs must be a cakewalk, but the reality is much different,” said Cheryl Marks Young, CFO of Easter Seals New Jersey. “You have to balance doing good in the world with still having the bottom line that allows you to continue to do good in the world. There is an adage in our industry, ‘no margin, no mission,’ and that really holds true.”

Ms.Marks Young’s began a lively discussion on the topic, “Not-for-Profits: Business Is Business, But Not for Women Only.” The Executive Dinner Series event was held at Red Knot in Kenilworth, NJ, with Marks Young as moderator. Finance executives from for-profit and not-for-profit organizations raised challenges shared by executives in both sectors. As the discussion’s title indicates, an enormous challenge is a business culture gap.

The Business Culture Gap

Marks Young brought up talent acquisition as a particularly difficult challenge among not-for-profits. Not only is the lower pay scale a problem, but there is a belief among finance professionals that once they work at a not-for-profit, they will have difficulty transitioning back to for-profit, if they choose to do so in the future. “The answer is to try and hire the right people, not just more people,” said Marks Young. “The challenge is to find qualified people willing to take that leap of faith and take a pay cut, in the hopes that, eventually, it will even itself out over time in some way, shape, or form.”

If talent acquisition is a problem, the solution is sometimes lying right under the executive director’s nose. Several of the meeting participants felt that they were not considered for roles at not-for-profits because of their backgrounds in for-profit companies. However, “at the end of the day, these are all just business models,” said Barry Lederman, former CFO of Wedgewood Pharmacy, now CFO of Eisai Pharmaceuticals ,both of which are for-profit companies. “Everyone has different business models. Going from for-profit to not-for-profit is just like transitioning in and out of industries. If you are a farmer, you don’t want somebody who isn’t from farming to become a farmer. But what should be more important is a person’s fit with your organization and mission.”

The group then moved on to the business culture gap that exists between the not-for-profit sector and the for-profit sector. “There is a bias that someone from a for-profit sector is not going to be able to embrace the mission, and instead, will bring a lot of hard-business practices that are not going to translate well to a non-profit scenario,” said Ellen Michelle Harris, chief legal officer at the Newark Housing Authority, a not-for-profit. “I say, ‘Why can’t we adopt practices that have worked well elsewhere? Why not embrace these practices and make it work in our not-for-profit framework?’”

Andrew Zezas, host of CFO Studio, publisher of CFO Studio magazine, and the evening’s host, described his experience as a for-profit professional providing pro bono real estate services to a not-for-profit organization. Tasked with settling an issue for a church and in a meeting with the organization’s leaders and board of advisors, Zezas found himself in discussions that were hindering the conclusion of certain business matters. “Their problem was not nearly as complicated as they thought it was,” said Zezas. “However, they were having difficulty resolving the issue because they were intertwining a lot of emotional, spiritual, and religious perspectives on what, to me, were some very clear business issues.”

According to several of the discussion participants, the business culture gap between for-profits and not-for-profits goes beyond having different mindsets and includes antiquated processes and reluctance to change. “I’ve been trying to get the organization to go paperless and I can’t tell you how many people — inside the organization as well as at the agencies we work with — have said, ‘If it’s not on paper, it doesn’t exist,’” said Anna DeJesus, CFO of Family & Children’s Services of Monmouth County, a not-for-profit.

“The single biggest challenge is getting people to open up to accept the change,” said Eileen Black, controller at Stevens Institute of Technology. She made the point that the chief characteristic of the great employees at not-for-profits is passion. They might not know the best methods for getting the job done, however. “You have to do it with bite-sized changes. These people … don’t have the experiences that we had going from for-profit to not-for-profit and our having seen more efficient ways of doing things. It’s up to us to sell our ideas on how to do things differently.”

Bringing For-Profit Strategy to Not-for-Profit Organizations

“I think executives from the for-profit sector can add a lot of value outside the box to a not-for-profit,” said Albert Caamic, CFO of Mitsui Foods, a for-profit company. “Because their goals had been focused on profitability, they can inject a different kind of excitement and perspective in raising and more importantly managing funds. For-profit CFOs focuses on the complete supply chain from findings way to buy more economical to spending within budget constraints. This forum however, changed my perspective as to how to be a CFO for a not-for-profit organization, particularly your day-to-day challenges in managing funds; I give you guys a lot of credit and respect.

Many of the dinner guests who did make that transition from for-profit to not-for-profit discussed how some of the corporate approaches to finance helped their organizations. “I am encouraging my colleagues to not be apologetic about our non-profit mission and try to convince them it’s OK to talk about money for that mission,” said Harris.

Edward Imparato, CFO of St. Dominic’s Home, a not-for-profit, experienced a bit of a barrier as a businessperson coming into a charitable organization. He overcame that perception by engaging others. “The folks who are running the programs are very focused and passionate about what they do; but if they want to keep the program running, it has to be financially sustainable,” he said. “When you begin to talk to folks within the organization about how they are stakeholders and their value is the sustainability of the service they are delivering, people get it and they begin to connect the dots. If you are creating value and the organization can help more people as a result, they are more open to changes.”

Marks Young said she met with some opposition within her organization when she first took her position because she wanted to do a cash-flow analysis. “After I did the analysis and allowed everybody time to review it and digest it, we all came to an agreement about where our pain points were and started on the road of, ‘OK, now how do we fix them?’” she said.

Credit and Cash Flow

Before becoming an executive for Easter Seals New Jersey, Marks Young transitioned through several industries, including, telecommunications, aerospace, medical, and entertainment. Several other dinner guests also moved from positions at for-profit companies to not-for-profit organizations, including Imparato, who was previously senior vice president and CFO of United Water, a for-profit. “With my own experience, first as a CFO at a billion-dollar company and now with a $50 million not-for-profit, the issues are very much the same,” he said. “In some cases, the not-for-profit is more challenging because you can’t access credit and you can’t market your organization in certain ways.”

Nancy Rogerson, vice president and CFO of CherryRoad Technologies, a for-profit, had a different viewpoint. Sometimes, a for-profit company doesn’t yield profits and has the same difficulty gaining access to credit. “I’ve worked through difficult years,” said Rogerson. “While I’m not answering to donors, I am answering to the shareholders who have had to put money back into the company because the banks want to see a positive bottom line before they give credit.”

Joanne Ferris, former CFO and EVP of Applied Communication Sciences, a for-profit, has dealt with some of the same challenges not-for-profits face when it comes to working with government agencies to secure project contract funding. Ferris faced an ever-growing level of government regulations and spoke about the cost of complying with these requirements. “Government agencies impose so much regulation on your organization that it actually creates overhead,” said Ferris.

CFOs at not-for-profits do experience the added challenge of depending on donors for a percentage of their funding. “I don’t sell [any] product so I can’t raise my prices,” said Bob Barry, CFO of Community FoodBank of New Jersey, a not-for-profit. “I am only dependent on people within the state to give their money to us to run a program, and that’s a very daunting prospect. Eighty percent of our budget comes from people giving money and it’s a crapshoot.”

Cash flow is a common challenge, but not-for-profits have an added obstacle when, as Barry described, a large percentage of funding comes from donors. “From my experience, one of the biggest obstacles you have is cash flow,” said Edward Schultz, principal at Highland Group. “Cash flow drives everything, but forecasting your cash is much more difficult than it is for a person in the for-profit sector.”

Expectations of Accountability

The executives around the table also discussed the increasing demands on not-for-profits for accountability. Lisa VanPatten, CFO at Kitara Media, a for-profit, previously worked for the Doris Duke Charitable Foundation and spoke about how the Gates Foundation played a major role in changing donor expectations of not-for-profits. “What Bill and Melinda Gates did was issue their grants in batches, so if you wanted to receive your entire grant, you had to show that you were achieving what you said you could achieve,” said VanPatten. “It was really earth-shattering in the not-for-profit world to be held accountable the way people are in the for-profit world. It is a great discipline.”

Christopher Rausch, CFO of Somerset Tire Service, Inc., had a unique perspective on accountability. While his company is a for-profit business, it has an Employee Stock Ownership Plan (ESOP) model. “I have to answer to everyone in the company about our financial health,” said Rausch. “It’s employee-owned so every single person in that company has an interest in our profitability and our outcome. That is similar to what the donors expect from a not-for-profit. Anytime you’ve got people who are contributing in any form — whether it’s in the form of money or in the form of expectations — you have to answer to them.”

Marty Latman, CFO of Prestige Corporation, a for-profit, has worked in both not-for-profit and for-profit organizations. “As a CFO of a not-for-profit, it’s your job to establish the organization’s credibility and see to it that the dollars will be spent according to what they are being raised for,” said Latman. “You are the activist [determining] where the funds are directed. And whether you accept it or not, you are also a public relations person, because to people on the outside of your organization, you hold the position of responsibility for the way the dollars are spent.”

Having a public face of accountability is a relatively new concept for many not-for-profit organizations. Thomas Bongiorno, vice president, corporate controller and Chief Accounting Officer at Quest Diagnostics, a publicly-held for-profit, and board member of the New Jersey Division of the Salvation Army, a not-for-profit, explained that it has been difficult to educate members of the not-for-profit on the value of self-promotion. “This issue is at the intersection of the for-profit versus non-profit because the advisory board is made up mostly of people from the profit side,” said Bongiorno. “[The Salvation Army’s mission is very important; they are Salvationists. But they are not good at self-promotion. … For example, they were first on the scene serving meals after Super Storm Sandy, but the American Red Cross got better coverage. We have that tension of the board trying to advise them to have more of a face in the public sphere. The donors want to hear about it. But people in the Salvation Army are understated.”

Like their colleagues in the for-profit sector, CFOs at not-for-profit organizations are taking on roles and responsibility outside finance and shaping their organizations’ futures.

Claude Draillard, CFO of Dassault Falcon Jet, is taking his organization to greater heights through collaboration and unmatched customer service.

By Alex Palmer

“What’s cooler than the best business jet?” asks Claude Draillard, chief financial officer of Dassault Falcon Jet Corp., laying out the case for why he loves his job. “It is a mix of technology, effectiveness, and luxury. We provide to our customers a working tool that gets them nearer to where they need to be than any airline can, in a highly customized environment that provides all necessary [technology], entertainment, and privacy.”

As CFO, Draillard is responsible for making sure the Company, whose impressive U.S. headquarters located in Little Ferry, NJ, overlooking the Teterboro Airport, provides its customers with transportation that is world-class in every sense — range, avionics, fuel efficiency, comfort, design — for the years or decades they own a Falcon Jet. That means combining superb resources with the organization’s strategy to provide highly sophisticated machines with tailored interiors, and cutting-edge technology that will exceed the expectations of the most demanding customers.

Or as Draillard puts it, “when a famous movie director and producer chooses a Falcon 7X to support his operations, it is because we aligned the best engineering with the best interior to provide a superior and economically viable solution to his long-range transportation needs.”

A Long-Cycle Industry

Ensuring that Dassault Falcon Jet satisfies exceptionally demanding high-level customers requires keen decision-making skills and deep understanding of the organization’s myriad components. And because business aviation is a long-cycle industry, the leadership at Dassault Falcon Jet must look far into the future, in addition to focusing on immediate concerns when considering the Company’s financial situation.

“[You have to] keep looking at the big picture and what you want it to look like in three, five, 10 years from today, while tending to every day’s affairs,” says Draillard. “You keep an eye on your order bookwhile wondering how come the catering for a demo flight in China is so expensive.”

It takes about 30 to 36 months to manufacture a jet, depending on the level of customization the customer requests, but the lifespan of a Dassault aircraft is 30 years or more. Over that time, it may have three or four owners, and each of those owners will have specific expectations and unique service requirements. In addition, buyers carefully consider resale value. Result: No design decision can be made without taking a long view of its impact on current customers, prospective future owners, and the place, itself.

Collaboration Key

Dassault workers take great pride in the fact that the business jets are designed by the same engineering team that designs Dassault fighter jets. Moreover, at every level of the Company, Draillard says, “there is a mindset that what we do [in the] short term influences what we do long term.”

On a recent morning, he went to Daussault Falcon Jet’s Delaware service center and spoke with the supervisor on the shop floor. The CFO asked, “What is the most important thing you do?” The supervisor, overseeing the servicing of the Company’s jets answered: “We help you sell this aircraft.”

Draillard emphasizes that workforce collaboration is vital. He learned this early on when he joined Dassault Falcon Jet’s parent company, St. Cloud, France-based Dassault Aviation, in 1994 as part of the Company’s Methods and Projects division (he had spent a few years in an accounting firm, of which he says “I loved my job, I loved my clients, but I didn’t like the [accounting] firm at all”).

In this first job at Dassault, Draillard was the go-between for the IT and finance sides of the Company. “I was really trying to make IT people understand what the requirements are from accounting,” says Draillard.

He climbed the ladder of Dassault Aviation’s finance department before moving across the Atlantic to Dassault Falcon Jet in October 2005 as manager, then director, of financial reporting. In February 2009 he stepped up to vice president of finance and CFO. Dassault Aviation (the parent company) is owned 51 percent by the Dassault family, 46 percent by Airbus Group; the remaining 3 percent is listed on the Paris Stock Exchange. In 2013, the total sales for the Dassault Aviation Group was €4.6 billion, of which 70 percent was Falcon.

In two decades, technology has changed greatly, but “the way you interact with IT hasn’t changed that much,” says Draillard. Now, as when he first began, success comes when someone within the finance department takes ownership of the lines of communication between finance and IT. “If you’ve got that person on your team, that’s great leverage to make the finance [arm of the Company] more up-to-date, competitive, and eager to serve the rest of the organization, and its customers,” says Draillard.

Today, he points out, the emphasis has shifted away from getting internal users to adopt the latest technology and toward ensuring they are using that technology as efficiently as possible — taking away repetitive tasks and making sure the data being produced is of the highest quality.

“The improvement in the finance team’s performance over the last 10 years was greatly related to steps taken in IT,” says Draillard, pointing specifically at the Company’s electronic data interchange (EDI), allowing greater integration between functions.

Internal and External

While much of Draillard’s work involves helping to create a lean and financially effective company, he also must consider points such as pricing strategy, customer financing options, and purchasing terms — all filtered through the lens of the Company’s position as a luxury brand.

“You’re talking to a customer who is paying anywhere between $26 and $52 million for an aircraft,” he says. “So it might be an individual who makes the decision himself, or it might be a head of purchasing at a company with a very structured acquisition process where you will seldom deal with the CEO.”

The type of purchaser has not radically changed in Draillard’s years at Dassault. But buyers’ geographical demographics have, as Asia has become a bigger customer for the Company’s aircraft. Another change: While decades ago, the typical buyer was often a pilot himself and wanted to spend his time in the cockpit, these sorts of customers are getting older, with many hanging up their pilot’s caps. The younger generation is less likely to be as interested in doing any flying themselves.

“Their requests are different — they want to know if they have Wi-Fi onboard, if they can use their iPad to control the temperature,” says Draillard. “There has been a significant shift from ‘this is the fun of flying’ to ‘this is my second home or place of business and I want all the conveniences.’ Like you or I would, they want to entertain themselves and also work, just like they do at home.”